The low valuation multiples for value stocks provide a margin of safety that growth stocks rarely offer. However, the challenge lies in determining whether these cheap assets are genuinely undervalued or simply on sale due to their potentially deteriorating business models.
Separating the winners from the value traps is a tough challenge, and that’s where StockStory comes in. Our job is to find you high-quality companies that will stand the test of time. Keeping that in mind, here are three value stocks climbing an uphill battle and some other investments you should look into instead.
Gap (GAP)
Forward P/E Ratio: 12.5x
Operating under the Gap, Old Navy, Banana Republic, and Athleta brands, Gap (NYSE:GAP) is an apparel and accessories retailer selling casual clothing to men, women, and children.
Why Does GAP Fall Short?
- Sales tumbled by 1.3% annually over the last three years, showing consumer trends are working against its favor
- 2.2 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
- ROIC of 7.7% reflects management’s challenges in identifying attractive investment opportunities
Gap’s stock price of $27.41 implies a valuation ratio of 12.5x forward P/E. Dive into our free research report to see why there are better opportunities than GAP.
Harley-Davidson (HOG)
Forward P/E Ratio: 14.4x
Founded in 1903, Harley-Davidson (NYSE:HOG) is an American motorcycle manufacturer known for its heavyweight motorcycles designed for cruising on highways.
Why Should You Dump HOG?
- Number of motorcycles sold has disappointed over the past two years, indicating weak demand for its offerings
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $21.12 per share, Harley-Davidson trades at 14.4x forward P/E. Check out our free in-depth research report to learn more about why HOG doesn’t pass our bar.
Labcorp (LH)
Forward P/E Ratio: 14.6x
With over 600 million tests performed annually and involvement in 90% of FDA-approved drugs in 2023, Labcorp (NYSE:LH) provides laboratory testing services and drug development solutions to doctors, hospitals, pharmaceutical companies, and patients worldwide.
Why Are We Hesitant About LH?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 12.3 percentage points
- Eroding returns on capital suggest its historical profit centers are aging
Labcorp is trading at $257.35 per share, or 14.6x forward P/E. If you’re considering LH for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.